STATEMENT OF RICHARD R. KOLODZIEJ, PRESIDENT, Mr. KOLODZIEJ. Excellent. The Natural Gas Vehicle Coalition appreciates the opportunity to be here this morning to discuss our views on the actions that Congress can and should take to reduce America's use of foreign oil by accelerating the purchase and use of alternative fuel vehicles. The Natural Gas Vehicle Coalition is a national organization with more than 180 member companies ranging from natural gas utilities to major automobile manufacturers to other equipment and service providers to environmental organizations and government organizations. Mr. Chairman, it is vitally important that we increase the use of non-petroleum alternative motor fuels, especially natural gas, because doing so would help address at least two important national public policy priorities simultaneously. First is the issue that we have already talked about, dependence on foreign oil. Natural gas vehicles contribute directly to reducing our dependence on foreign oil. The U.S. imports significantly more petroleum today than it did in 1992 when the Energy Policy Act was passed, and that is just not good public policy. It is not good for the country. The only way to break free of that reliance on petroleum fuels is to increase the use of non-petroleum alternative fuels. Efforts to increase fuel efficiency, while laudable and important and we have got to do that, will not by themselves improve energy security. A gasoline or diesel vehicle that gets 60 or even 80 miles per gallon is still 100 percent dependent on petroleum. The second way America benefits from increased use of NGVs is the environment. Compared to similar gasoline vehicles, NGVs produce far less carbon monoxide and volatile organic compounds and nitrogen oxides. They even produce 20 percent less greenhouse gases. Meanwhile, heavy duty vehicles are not necessarily the focus of this session today, but heavy duty vehicles produce far less NOx and up to 90 percent less particulates than a comparable diesel vehicle. In fact, heavy duty natural gas vehicles already meet the particulate levels called for in EPA's emissions standards that do not even go into effect until 2007. They also produce significantly less air toxics, which may in fact become the air quality issue of this decade. Today, there are over 100,000 natural gas vehicles on America's roads. There are over a million and a half worldwide, and the vehicles in America displace more than 100 million gallons of gasoline a year. The United States produces the best and the cleanest NGVs in the world and right now we have more alternative fuel vehicle models available than ever before. We have made great progress, but we have a long way to go. Consumers continue, as you have heard, to be hesitant to buy these vehicles because of the additional costs involved and the lack of a fueling infrastructure. Both these problems would be resolved if vehicle demand reached a critical mass. If we reach the critical mass, we get economies of scale for the manufacturers. If we get economies of scale for the manufacturers, we would come down on our costs. Because of the substantial public benefits that NGVs offer, Congress could and should take steps to make this overall improvement happen, and in our written testimony we have indicated a number of recommendations. The single most important step would be the passage of the CLEAR ACT, S. 760. I loved hearing all those positive things earlier about S. 760. The CLEAR ACT would be a meaningful tax program, tax incentive program, that would provide a market-driven, non-regulatory approach to the purchase and use of alternative fuel vehicles. Now, we recognize that the CLEAR ACT is not within the jurisdiction of this committee. However, we believe that it is crucial that the energy policymakers on this committee send a clear and unambiguous message that enactment into law of the provisions of the CLEAR ACT is a critical part of our national energy strategy and is in the best interest of the country. The NGV Coalition also believes that the Energy Policy Act must be restructured. While that law has had a big impact on getting automakers to produce alternative fuel vehicle models, as was mentioned earlier, it has not achieved anywhere near the petroleum replacement goals envisioned. In our written testimony we indicate a program, a number of specific recommendations that would build on the positive achievements of EPAct, increase the amount of alternative fuel used and therefore foreign oil displaced, and increase the amount of flexibility available to the covered fleets to help them more effectively comply with the law. A third area is R&D. Federally sponsored NGV R&D has been critical to the NGV industry's technical advancements, and the industry has worked closely with the Department of Energy to develop a comprehensive 5-year NGV R&D strategic plan. Unfortunately, the Department has never requested sufficient funds to implement the Federal Government's part of that plan, instead focusing, we believe disproportionately, on funding diesel and gasoline projects. We urge the committee to instruct DOE to substantially expand the NGV program to bring it into line with the 5-year plan we have jointly developed, especially with respect to natural gas as a fuel for hybrid vehicles and as a hydrogen source for fuel cells. Mr. Chairman, that concludes my remarks. Our written comments include other recommendations concerning programs that would help further the use of alternative motor fuels and I look forward to working with you and the committee on implementing this program. [The prepared statement of Mr. Kolodziej follows:] PREPARED STATEMENT OF RICHARD R. KOLODZIEJ, PRESIDENT, NATURAL GAS VEHICLE COALITION INTRODUCTION Mr. Chairman and Members of the Committee, the Natural Gas Vehicle Coalition (NGVC) appreciates the opportunity to discuss our views on the actions Congress can and should take to reduce America's use of foreign oil by accelerating the purchase and use of alternative fuel vehicles. My name is Rich Kolodziej, and I am President of the NGVC. The NGVC is a national organization dedicated to the development of a growing, sustainable and profitable natural gas vehicle market. The NGVC represents more than 180 natural gas companies, equipment manufacturers and service providers, as well as environmental groups and government organizations. Reducing the use of petroleum by increasing the use of non-petroleum alternative motor fuels should be among the highest policy priorities of the federal government for at least two fundamental reasons. First, the lack of stability and competition in oil markets and the continued growth in oil imports demonstrate beyond doubt that it is time to get serious about reducing our reliance on oil imports. The oil producing nations are in a monopoly position, and we are held hostage to their decisions about production levels. American consumers must be provided a choice. Second, too many Americans live in urban areas with poor air quality. It is estimated that more than 100 million Americans live in areas that are not in compliance with national ambient air quality standards. The result has been an alarming increase in the incidence of asthma and other respiratory ailments in children and the elderly. Increasing the use of alternative fuel vehicles-especially natural gas vehicles-helps address both these policy priorities simultaneously. Now is the time to take action. Today, there are more alternative fuel vehicles (AFVs) in operation and models available than at any time before. Domestic natural gas is readily available. State and local governments across the country are adopting legislative incentives that will help pave the way toward more AFVs. In addition to the introduction of these vehicles, federal, state and local incentives also have encouraged increased investment in alternative fuel infrastructure. However, no one state or group of states alone can significantly alter the direction of any major national industry, such as the motor vehicle industry. Therefore, while the future for alternative fuel transportation technologies appears bright, much more must be done at the national level if we are to significantly reduce this country's reliance on imported oil, improve our air quality and develop profitable alternative fuel vehicle markets. Since consumers continue to be hesitant to buy many AFVs because of the costs involved and the lack of infrastructure, Congress needs to expand incentives for all alternative fuels, including measures that will bring down the cost of acquiring AFVs and purchasing alternative fuels. Congress also should adopt incentives that support the expansion of the alternative fuel infrastructure and reduce the incremental costs involved. 1. THE NEED TO REDUCE OUR DEPENDENCE ON FOREIGN OIL IS GREATER THAN EVER The U.S. imports significantly more petroleum today than it did in 1992 when the Energy Policy Act (EPAct) was enacted. Net imports are up more than 2.8 million barrels a day while domestic production has declined by nearly 1.3 million barrels a day. The combination of lower domestic production and increased demand means that oil imports also make up a larger share of total oil consumed in the US. In 1992, crude oil imports made up approximately 45 percent of domestic supply. Last year, crude oil imports accounted for 59 percent of total supply. The Energy Information Administration's (EIA) 2001 Annual Energy Outlook forecasts that oil imports will approach 61 percent of total supply this year. EIA's long-term forecast has oil imports making up 69 percent of U.S. supply by 2010, and more than 71 percent by 2020. Persian Gulf and OPEC member countries supply an important part of U.S. crude oil and petroleum imports. The EIA reports that in 1999 the U.S. relied on OPEC members to provide approximately 46 percent of imported petroleum; Persian Gulf states alone provided approximately 23 percent of total imports. While EIA's longterm forecast shows OPEC continuing to provide about 46 percent of U.S. petroleum demand in 2020, the forecast shows Persian Gulf exports becoming a much more significant part of OPEC exports to the US, rising from 39 percent to 50 percent. OPEC and Persian Gulf exports also make up a major component of world oil supply. OPEC members currently provide about 40 percent of worldwide supply. OPEC's share of the world oil market is expected to reach 51 percent by 2020, according to EIA's forecast. Persian Gulf oil is even more key to world oil supplies. Persian Gulf exports in particular are of concern since this region has generally been unstable and continues to be the source of geopolitical conflicts. Of particular concern is Iraq, which continues to be the wild card in international oil markets. Iraqi currently has an oil production capacity of 3.0 million barrels of oil per day. This represents nearly four percent of world oil production. This is a significant volume of oil and its removal from international markets at a time when reserve stocks are low could significantly affect world oil prices. Over the next two decades, the EIA projects that Iraq will more than double its oil production, ensuring that it continues to be an important player in international oil markets. The recent curtailment of world oil production by OPEC members demonstrates the serious consequences of even small disruptions in the supply of oil to international markets, and proves that OPEC is capable of acting cohesively to control international oil markets. It is precisely because of their growing market power that they have been able to affect world oil prices. As recent events demonstrate, the economic effect of supply disruptions is not limited to any one region but rather reverberates across international commodity markets. The notion that the U.S. can increase its energy security by reducing its overall reliance on OPEC oil simply is not true. Disruptions of oil supplies from the Persian Gulf and from OPEC members will still result in much higher prices being paid for oil imports regardless of their country of origin. In addition, while the market share for petroleum in the America's residential, commercial, industrial and power generation markets has declined substantially over the past 25 years, petroleum still has a virtual monopoly in our transportation sector. An additional concern is the growing demand for oil by developing nations. It is estimated that by 2020 demand for oil worldwide will increase by over 50 percent. Much of this will occur because of economic expansion and growing vehicle populations in developing nations, especially China. This increased demand is expected to place significant upward pressure on world oil prices. U.S. reliance on foreign oil has a significant impact on our economy. Petroleum imports result in fewer dollars spent at home and more sent overseas. Payments for imported petroleum jumped from $60 billion in 1999 to more than $100 billion in 2000, according to EĨA. 2. EPACT'S PETROLEUM DISPLACEMENT GOALS HAVE NOT BEEN ACHIEVED To combat our reliance on oil imports, EPAct set a national goal of replacing 10 and 30 percent of the petroleum used in light duty vehicles with non-petroleum alternative fuels by 2000 and 2010, respectively. EPAct was intended to create a viable alternative fuels market. Its goal was to reduce U.S. petroleum and crude oil imports and increase energy security by promoting reliance on domestic fuels. A report released last year by the U.S. General Accounting (GAO) indicates that unfortunately today, even after almost nine years of EPAct implementation, alternative fuel use accounts for a very small amount of overall motor fuel demand. According to the 1998 figures compiled by the GAO, total alternative fuel use-including the oxygenated blending stocks for gasoline accounts for less than 4 percent of all highway gasoline use. This is far short of the EPAct goal of 10 percent displacement by 2000. The amount of alternative fuel that is used in AFVs is even less. GAO reports that alternative fuel use in AFVs displaced only about 334 million gallons of gasoline or less than 0.3 percent of total gasoline consumption. The vast majority of the remaining amounts of non-petroleum fuel used in the country are comprised of MTBE or ethanol that is added to gasoline to meet the reformulated gasoline requirements of the Clean Air Act. 3. THE TRANSPORTATION SECTOR: THE KEY TO ENERGY SECURITY Concerns about energy security and the transportation sector's reliance on petroleum motor fuels led to the passage of EPAct. While the effort to increase alternative fuel use and to reduce the transportation sector's reliance on petroleum motor fuels has been disappointing, EPAct has nevertheless resulted in a number of positive developments. Today, the type and number of alternative fuel vehicles being sold, as well as the number of alternative fuel stations, has grown. The U.S. is the world leader in the field of alternative fuel vehicles and fueling infrastructure. The U.S. automakers should be commended for their impressive array of low polluting, AFVs. Yet, still more must be done. Since the 1970s, all major energy-consuming sectors other than transportation have significantly reduced their dependence on petroleum. Today, the transportation sector remains almost totally dependent on petroleum motor fuels. The U.S. transportation sector is responsible for more than two-thirds of all petroleum consumption and an astonishing 15 percent of world oil demand. The only way to break free of the reliance on petroleum fuels is to increase the use of alternative fuels. Efforts to increase fuel efficiency in gasoline and diesel vehicles are laudable and must be a continuing part of a national energy strategy. However, increased fuel efficiency for gasoline and diesel vehicles alone will not improve our country's energy security. Improving fuel efficiency will simply slow-down the current growth in oil consumption. Fuel efficiency does not provide energy consumers with options for fueling their vehicles. A gasoline or diesel vehicle that gets 60 or even 80 miles per gallon is still 100 percent reliant on petroleum supplies. Increasing the use of alternative fuels will provide consumers with real options when it comes to supply disruptions or price hikes. We cannot wait for the next supply disruption or price spike to create the necessary fueling infrastructure. Those efforts must begin now. Given the significant amount of energy consumed by the domestic transportation sector, a strong U.S. market for alternative fuels would put downward pressure on international oil prices. In addition, exports of U.S. alternative fuels technologies would not only bolster our own economy but would further reduce world-wide dependence on foreign oil, further lessening the market power of certain oil exporting nations. News of growing international interest in alternative fuels increases daily. Countries such as Argentina, China, Chile, Egypt, India and Mexico increasingly are looking at alternative fuels to combat air pollution and reduce oil imports. 4. THE CURRENT NATURAL GAS VEHICLE MARKET There are more than 100,000 natural gas vehicles in-use today. These vehicles are owned and operated by the federal government, local and state governments, and, increasingly, private fleets. These vehicles include passenger cars, light duty trucks, school buses, transit buses, refuse haulers, and many other types of vehicles. It is important to note that nearly all of the new NGVs placed in-service today are produced by original equipment manufacturers (OEMs). Such well-known companies as DaimlerChrysler, Ford Motor Company, General Motors, Honda, Toyota, Blue Bird, and Freightliner are manufacturing these vehicles. Nearly every manufacturer of transit buses now offers a line-up of natural gas buses. In addition, heavy-duty natural gas engines are now available from Caterpillar, Cummins, Detroit Diesel, John Deere and Mack. While the number of NGVS in-use is still small in terms of the overall vehicle population, it is growing. Since 1992, the number of NGVs in-use has increased fourfold. More impressive, the total amount of fuel consumed by these vehicles has increased more than six-fold. Today, NGVs displace more than 100 million gallons of gasoline a year, representing about 27 percent of all alternative fuel that is consumed in alternative fuel vehicles. 5. THE ENVIRONMENTAL BENEFITS OF NATURAL GAS VEHICLES Natural gas is one of the cleanest alternative fuels. When compared to average petroleum vehicles, NGVs reduce exhaust emissions of carbon monoxide (CO) by 50%, non-methane organic gas (NMHC) by 88% and nitrogen oxides (NOx) by 66%, and produce 20% fewer greenhouse gases. NGVs have been certified to be substantially cleaner than traditionally fueled vehicles. Several models already meet or exceed California's ultra-low emissions vehicle (ULEV) and super ultra-low emissions vehicle (SULEV) standards. Heavy-duty vehicles powered by natural gas generally reduce emissions of particulate matter by 90 percent and NOx by more than 50 percent. Natural gas engines also produce significantly less air toxic emissions. Regulatory agencies across the country increasingly are looking to natural gas engines to displace diesel engines as an effective strategy for reducing pollution. For example, officials in California have decided that natural gas or other alternative fuels should power most new government-owned heavy-duty vehicles. In addition, many transit agencies around the country have decided to exclusively rely on natural gas buses when purchasing new buses for their fleets. The Honda Civic GX illustrates the excellent emissions attributes that natural gas has as a vehicle fuel. Even though they have been working with natural gas for only a few years, Honda has been able to achieve truly remarkable results with the Civic GX. In fact, the natural gas Honda GX, which is certified as SULEV, is the cleanest internal combustion engine powered vehicle ever commercially produced, producing far less pollution than Honda's other low-polluting vehicles, including their hybrid electric vehicle. Initially, regulators had difficulty even measuring the emissions from the Honda GX. A gasoline vehicle certified to just the minimum current federal standards emits nearly 194 times more pollution than the dedicated natural gas Honda Civic GX. Vehicles produced by the DaimlerChrysler, Ford and General Motors also have met some of the most demanding emission standards in existence. For example, a one-mile trip to the corner grocery store and back in an average pickup truck emits as much smog forming hydrocarbons as is emitted by the Ford F-250 NGV in a 247 mile trip. More immediately, natural gas vehicles can provide critical emission reductions today. The recently announced EPA heavy-duty emission standards will not be fully implemented until 2010. Natural gas heavy-duty vehicles already meet the particulate matter levels called for in the proposed rules and are years ahead of diesel en |